It took “ten courageous citizens” recognizing the difficulty in obtaining banking services for marijuana-related businesses to form the Fourth Corner Credit Union in March 2014. Their plan was to “organize a Colorado state-chartered credit union to develop a robust anti-money laundering . . . program to comply with the newly issued FinCEN guidance and Cole Memorandum….” The Fourth Corner Credit Union became necessary because financial institutions had refused to provide banking services to the cannabis industry based on the fear of potential federal criminal liability. Aside from potential criminal exposure, the banking industry also feared: the loss of federal insurance; asset seizure; loan collateral vulnerability; the prospect of having to monitor operational legality and compliance; and potential civil lawsuits. The banking industry’s refusal to open or maintain accounts related to the cannabis industry is giving marijuana-related businesses quite an issue when these businesses try to secure banking services – services that other businesses take for granted – with financial institutions. As a result, cannabis-related businesses began to look towards specialized credit unions to serve their banking needs. Unfortunately, Judge R. Brooke Jackson of the United States District Court for the District of Colorado issued a recent ruling that effectively closed the credit union’s doors to the cannabis industry by dismissing a lawsuit that sought federal approval for the first credit union to be established for the marijuana industry in Colorado.

In Fourth Corner Credit Union v. Federal Reserve Bank of Kansas City, Case No. 15-CV-01633 (D. Colo.), Judge Jackson rejected Fourth Corner Credit Union’s lawsuit to establish a federal credit union for cannabis-related businesses. In so doing, it noted that marijuana remains illegal under federal law. Fourth Corner Credit Union did not dispute that marijuana remained illegal under federal law. Instead, it argued that the previous guidelines issued by the U.S. Department of Justice in the Cole Memorandum were tantamount to tacit approval of the cannabis industry and banking, and cited to the Monetary Control Act of 1980 (12 U.S.C. §248a), which requires that the Federal Reserve provide all depository institutions with equal access to the Federal Reserve payments system on a basis that is non-discriminatory.

Judge Jackson addressed Fourth Corner Credit Union’s argument in a nine-page decision in which he noted that guidance issued by FinCEN and the Cole Memorandum “simply suggest that prosecutors and bank regulators might ‘look the other way’”, but a “federal court cannot look the other way” when interpreting and applying federal law. In declining the relief sought by Fourth Corner Credit Union, the Court also relied on prior bankruptcy court decisions, which held that marijuana-business debtors cannot seek and obtain bankruptcy protections under federal statutes because their company activities are federal crimes. Judge Jackson concluded his decision by stating, “I regard the situation as untenable and hope that it will soon be addressed and resolved by Congress.”